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Why Lifetime Value by Acquisition Source is Important

Polly Flinch
Why Lifetime Value by Acquisition Source is Important

"Big Data" is, and will continue to be, the buzzword for marketers everywhere.

While talking about big data is all well and good, having actionable data and insights is the key to success. Data for data’s sake isn’t going to get you anywhere; using data to make the business case to your CEO, inform your marketing strategy or acquire the right type of customers is the key.

For marketers today, it’s mission-critical to understand which sources of traffic are driving your highest quality dollars. This knowledge can help inform a marketer’s strategy and assist them in deciding where to use their marketing budget, as well as give them an idea of whether their latest initiative is actually working. After all, you might not want to pump additional dollars into Google PPC Ads, if your highest value clients are coming from other acquisition sources.

Let’s take a look at two retailers who have access to customer lifetime value by acquisition source.

For Retailer 1 and 2 in our example, data for the entire customer base (as well as best customers) has been pulled.

When you compare all customers to best customers, there should be a correlation between traffic sources that show the highest lifetime value. If there isn’t, you want to dig in.

It’s possible there is a high volume of one-time buyers being acquired through this particular traffic source. This alone can help a retailer decided whether they want to keep advertising through a particular traffic source since customers who come through this channel are less likely to turn into repeat customers, which is the primary goal of data-driven marketing.

All Customers

Retailer 1 – All Customers

Retailer 1 – All Customers 

Retailer 2 – All Customers

Retailer 2 – All Customers 

When looking at all customers for Retailer 1 and 2, you can see these retailers need to approach their marketing strategy and channels differently. For Retailer 1, a majority of their revenue is coming in directly from their website, with Facebook and a referral website following closely behind. However, the highest lifetime value traffic source for Retailer 2 is Yahoo, followed closely by Bing and Google.

In this instance, Retailer 1 might want to focus on upping spend on Facebook.com ads, and strengthening their relationship with the referral website. Retailer 2 would want to dig in on what marketing strategy they already have in play for these popular search engines. So, how does this compare to the best customer segment?

Best Customers

Retailer 1 - Best Customers

Retailer 1  - Best Customers 

Retailer 2 – Best Customer

Retailer 2 – Best Customer 

For Retailer 1, the graphs are comparable. The highest grossing traffic sources remain the same from all customers to best customers, so honing in on Facebook ads and growing the relationship with the referring website is definitely the way to go. If they really wanted to have a stretch goal for the year, Retailer 1 could try and increase the value of customers coming in through Google Ads. Using these charts, they could monitor their progress on a weekly, monthly and yearly basis.

Remember how Yahoo was the leader for highest lifetime value for Retailer 2? When you look at Retailer 2’s best customer segment, Bing is actually the higher value traffic source followed by Yahoo and Google. With this in mind, it makes sense for Retailer 2 to put the most money into Bing and Yahoo, and save a smaller amount to play with in Google.

The whole point of lifetime value by acquisition source is to measure the success of marketing initiatives. Understanding where customers are coming from and, more importantly, where your best customers are coming from is an advantage for retailers. This information will help retailer’s inform their acquisition strategy and leverage their marketing budget to grow their repeat buyer and best customer segment.

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Polly Flinch is the Content Marketing Coordinator at Windsor Circle. She spends her time building out content for consumption through many different marketing channels. With a background in marketing and retail, Polly brings a unique understanding of the power of data-driven marketing to her writing and the ability to take data analytics and apply them to real world situations.
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